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Transshipments Through UAE to Iran Yield Fine for Texas Company

Tuesday, November 04, 2014

Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control announced Oct. 31 that a Texas company has agreed to pay $44,850 to settle potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations. OFAC states that between July 2006 and October 2008 the company exported or attempted to export nine shipments of goods from the United States to the United Arab Emirates with reason to know that they were intended specifically for supply, transshipment or reexportation to two oil drilling rigs destined for or located in Iranian waters.

The base penalty amount for the apparent violations was $69,000. OFAC considered the following to be aggravating factors: the company demonstrated reckless disregard for U.S. sanctions requirements by failing to conduct due diligence to determine the end users of its products; the company was aware in 2008 that exporting goods for use on a rig in Iranian waters constituted a violation of the ITSR because U.S. Customs and Border Protection had seized one of its shipments destined for a drilling rig located in Iranian waters in July 2006; the company’s management at least had reason to know of the subject transactions given its apparent direct involvement in the shipments; the apparent violations aided, or would have aided, the Iranian petroleum industry, resulting in actual or potential harm to U.S. sanctions program objectives; and the company did not implement appropriate policies and procedures to ensure compliance with U.S. sanctions laws prior to engaging in the apparent violations.

On the other hand, OFAC considered the following to be mitigating factors: the company did not appear to have actual knowledge that the drilling rigs were destined for or located in Iranian waters at the time of the subject transactions (although it had reason to know these facts because they were publicly and readily available before and at the time of the apparent violations); the harm to U.S. sanctions program objectives was minimized because CBP detained five of the nine shipments in the U.S.; and the company is a small business, has not received a penalty notice or finding of violation from OFAC in the last five years, took remedial measures by adopting internal controls and procedures to prevent a recurrence of the apparent violations, cooperated with OFAC, and forfeited the goods involved to CBP in at least four of the nine apparent violations.

OFAC notes that the company did not voluntarily self-disclose the apparent violations, which constitute a non-egregious case.